We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So we’ll take a look at whether insiders have been buying or selling shares in Middlesex Water Company (NASDAQ:MSEX).
Do Insider Transactions Matter?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that ‘insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers’.
Middlesex Water Insider Transactions Over The Last Year
Over the last year, we can see that the biggest insider sale was by Chairman Dennis Doll for US$199k worth of shares, at about US$49.71 per share. That means that even when the share price was below the current price of US$57.10, an insider wanted to cash in some shares. Even though it doesn’t necessarily mean anything, that’s certainly not a positive sign, in our book. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was just 4% of Dennis Doll’s stake.
Over the last year, we note insiders sold 22.06k shares worth US$1.0m. All up, insiders sold more shares in Middlesex Water than they bought, over the last year. The average sell price was around US$46.72. It’s not ideal to see that insiders have sold at around the current price. While some insiders have decided to take some money off the table, we wouldn’t put too much weight on this fact. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
I will like Middlesex Water better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Middlesex Water Insiders Are Selling The Stock
Over the last three months, we’ve seen significant insider selling at Middlesex Water. In total, insiders dumped US$214k worth of shares in that time, and we didn’t record any purchases whatsoever. Overall this makes us a bit cautious, but it’s not the be all and end all.
Insider Ownership of Middlesex Water
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. It appears that Middlesex Water insiders own 4.1% of the company, worth about US$39m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Do The Middlesex Water Insider Transactions Indicate?
Insiders sold Middlesex Water shares recently, but they didn’t buy any. And there weren’t any purchases to give us comfort, over the last year. But since Middlesex Water is profitable and growing, we’re not too worried by this. Insiders own shares, but we’re still pretty cautious, given the history of sales. We’re in no rush to buy! Of course, the future is what matters most. So if you are interested in Middlesex Water, you should check out this free report on analyst forecasts for the company.
But note: Middlesex Water may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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